The US deadline on Tehran for re-opening the Strait of Hormuz has subtly shifted until tomorrow. The holiday-thinned market initially bought dollars and oil and took risk off in response to the continued attacks and the escalation of US rhetoric. However, negotiations, apparently led by Pakistan, Egypt, and Türkiye for a 45-day cease fire, have captured the imagination of market participants, even though the negotiators themselves do not appear optimistic.
In quiet turnover, the dollar has given up its early gains, and as the North American session is about to begin, the greenback is lower against all the G10 currencies and emerging market currencies. US index futures are trading firmer and May WTI is off around 1% but is still near $110. It still seems binary. If the hopes are dashed, risk will come off as the conflict could dramatically escalate.
Prices
G10
• The euro finished the holiday-thinned session before the weekend on a soft note near session lows (~$1.1515). It slipped to $1.1505 before recovering on the back of hope of cease fire that will be negotiated. It has taken out the pre-weekend high (~$1.1550) to rise to almost $1.1570. The next important technical area is $1.1600 and then $1.1630-40.
• The conditions for material intervention to support the yen by Japanese officials do not appear present and the market does not appear to have given up on fishing for the official pain threshold. The dollar edged up to almost JPY159.85, a five-day high before falling to almost JPY159.30. Last Friday’s low was around JPY159.45. A break of JPY159.00, where options for about $672 mln expire late today, could spur a move to last week’s low near JPY158.30.
• Sterling traded heavily ahead of the weekend and slipped back below $1.32 in North American dealings. Earlier today, it held above the low set near $1.3160 last week, which it had not seen since last November. It recovered though last Friday’s high (~$1.3245) to reach nearly $1.3260. Above there, the next hurdle is around $1.3285, and there are options for GBP475 mln struck at $1.3300 that expire today.
• The US dollar reached a four-month high against the Canadian dollar last week slightly above CAD1.3965. It held below the pre-weekend high, near CAD1.3950, and had returned to last Friday’s low (~CAD1.3915). A break of CAD1.3900 could signal a move toward CAD1.3870.
• The Australian dollar settled about 0.25% higher last week. Still, after a 2.1% sell off the previous week, it was a faint-hearted bounce. And the Aussie closed below $0.6900. It was initially sold to almost $0.6875 today before it recovered to around $0.6935. Options for A$330 mln at $0.6900 expire today. To confirm the bullish outside up day, the Aussie must close above $0.6915.
EM
• The dollar has found support in the past three sessions near the 20-day moving average which comes in around MXN17.8350 today. It has been sold a little through MXN17.77 today, its lowest level since March 26. The greenback is posting an outside down day against the peso and must close below MXN17.8250 to confirm it. A convincing break could see MXN17.70 initially.
• The offshore yuan looks like it is going no place quickly. With mainland markets on holiday today, the greenback remains within last Thursday’s range (~CNH6.8725-CNH6.9040). At the same time, its relative stability makes it attractive for some market participants. Some are making the same case about Chinese government bonds. Since the war began, the yield on the 10-year Chinese bond is virtually flat. The 10-year Treasury yield is up 40 bp coming into today and the 10-year Gilt yield was up almost 60 bp. Japan’s 10-year benchmark yield has risen almost 30 bp, while Germany’s is up by 35 bp.
• The short squeeze engineered by the Reserve Bank of India last week by limiting positions of banks and denying them access to the non-deliverable forward market extended into today’s activity after last Friday’s holiday. The dollar peaked near INR95.1250 on March 30 and today traded down to INR92.78, the lowest level since March 18. It frayed the 20-day moving average (~INR92.83) and settled a little above INR93.06.
Other Markets
• The extended holiday means many equity markets are closed today. Japanese markets themselves were mixed. The Kospi and Indian equities gained more than 1%. The S&P 500 and Nasdaq futures are trading 0.25%-0.50% better.
• The 10-year JGB yield rose 3.5 bp to a new high near 2.43%. It was around 2.11% before the war. The 10-year Treasury yield is firm near 4.35%. It was near 3.94% before the war.
• Gold is trading firmly but is within the pre-weekend range (~$4554-$4800). Silver is a little better than flat, slightly above $73.
• Initially, May WTI rose to almost $115.50, a new high but hope that there would be a ceasefire ahead of the expiration of the US ultimatum, pushed the contract a little through $109. It is straddling the $110 area ahead of the North American open.
Data
• US March ISM services survey will be released today. Activity is likely to have slowed, and prices are expected to have risen. Mostly pre-war data is on tap this week. The mid-week release of last month’s FOMC minutes may offer insight into how officials are balancing the risk to both mandates. Still, the futures market is fairly convinced now there will be no change in policy in the coming months.
• Canada sees the March services and composite PMI. Canada’s economy was weak before the war. The composite PMI was above the 50 boom/bust level once last year (October) and was at 47.1 in February. It averaged 47.3 in Q4 25 and 46.8 in the first two months of 2026.
• Mexican markets re-open after the four-day weekend, and the high-frequency data, including gross fixed investment and private consumption are from January, making them too old to have much market significance. March domestic vehicle sales are also due. There is a strong seasonal tendency for March sales to improve (18 of the past 20 years). They stood near 118.3k in February.
• India’s final March composite PMI stands at 57.0 (up from 56.5 preliminary estimate). While for most other countries, this would be a constructive result, for India, it is the weakest since October 2022. The central bank meets at the end of the week. None of the 13 economists who participated in Bloomberg’s survey anticipate a change in the 5.25% repo rate, but the swaps market recognizes the risk of a hike after the central bank has taken measures to curtail bank’s ability to short or foster short rupee positions.
Reviewed by Marc Chandler
on
April 06, 2026
Rating:
